Regulating Short-Term Rental Properties

October 2, 2018 | Rusi Patel, Senior Associate General Counsel, GMA

This article appeared in the September 2018 issue of the Georgia's Cities newspaper.

Patel

E
very night, the house at the end of the block seems to be teeming with people. Never the same people. Sometimes the people are quiet. Sometimes the people are loud. There is a rotation of cars coming in and out of the driveway.

Not too long ago, this sort of situation might have described houses in a few vacation destinations such as the beach or the mountains, but today, in the sharing economy, more and more homeowners are discovering a new income source: short-term rental of their property.

There are a number of sharing economy platforms by which homeowners might rent their properties, such as Airbnb, HomeAway and VRBO. However, short-term rentals do not have to utilize such platforms and have historically occurred, especially in vacation communities, through the use of property management companies.

Regardless of the platform utilized, there is undoubtedly a boom in the short-term rental market. The sudden increase in short-term rentals has led to conflict in many communities across the country and across Georgia, and conflict can also lead to litigation.

Burton v. Glynn County
A few years ago, a private property owner challenged a Glynn County zoning ordinance, which prohibited them from using their property, situated in a single-family residential zoning district, as a short-term rental “perfect for weddings.” The use of the property as a wedding venue led to many neighbors complaining to the county about the increased noise, traffic and parking issues.

The county determined that the property was being used as a commercial event venue and was in violation of the zoning ordinance. The Georgia Supreme Court, in Burton v. Glynn County in 2015, ruled in favor of the county and held that the usage of the property as a short-term rental and wedding venue was in violation of the local zoning ordinance.

But what is a local government to do when the home is not being used for events and the short-term rental is much more residential? Cities across the country have been attempting to address such issues.

For instance, the city of Miami Beach, Fla. enacted local laws placing very large fines on illegal short-term rentals in an attempt to limit the number of short-term rentals. These fine amounts were in the thousands to tens-of-thousands of dollars range. As a result, the city faced a public relations spat with Airbnb and private property owners, the state legislature began considering legislation that would preempt cities’ abilities to regulate short-term rentals, and, in June, a lawsuit was filed against the city on behalf of Airbnb.

The lawsuit challenged the local ordinance as violating the state’s protections against excessive punishment, but it is not the only lawsuit against a city’s regulation of short-term rentals. Across the country, lawsuits have been filed by homeowners wishing to utilize their property as short-term rentals, by sharing economy companies and by organizations supported by sharing economy companies, against cities that have enacted ordinances regulating short-term rentals.

Additionally, model state legislation, which would preempt local control has been floated in many states. Here in Georgia, we have seen such legislation introduced as well as legislative study committees created to take on the task of analyzing the issues related to short-term rentals.

Some cities, such as Seattle and Savannah, have attempted to navigate these tricky waters by working with property owners and sharing economy companies in developing local ordinances governing short-term rentals. While this course may be difficult and time-consuming, it provides the potential benefit of avoiding future costly litigation.

Georgia law currently provides local governments with flexibility in regulating short-term rentals, but that flexibility is not absolute. For instance, state law prohibits local governments from requiring the registration of residential rental property or from performing investigations or inspections of residential rental property.

Whatever the course of action taken by a city in regulating short-term rentals, it is vital the city attorney is involved because one wrong step could lead to prolonged litigation. It is also important to remember that there are many interested parties when it comes to short-term rentals, including the property owner, the management company, neighbors, hotels, licensed bed and breakfasts and many others.